American woodmark corporation announces third quarter results
Winchester, va.--(business wire)--american woodmark corporation (nasdaq: amwd) (the "company") today announced results for its third quarter of fiscal 2023 which ended january 31, 2023. net sales for the third quarter of fiscal 2023 increased $21.0 million, or 4.6%, to $480.7 million compared with the same quarter of the prior fiscal year. net sales for the first nine months of the current fiscal year increased 16.9% to $1,585.1 million from the comparable period of the prior fiscal year. the company experienced growth in the builder and independent dealers and distributors sales channels during the third quarter and growth in all sales channels during the first nine months of fiscal 2023 versus the comparable prior year periods. net income was $14.7 million ($0.88 per diluted share) for the third quarter of fiscal 2023 compared with a net loss of $49.3 million ($2.97 per diluted share) in the same quarter of the prior fiscal year. net income for the third quarter of fiscal 2023 increased due to the absence of onetime pension settlement charges of $69.5 million related to the termination of the company's pension plan in the prior year third quarter and an increase in net sales largely as a result of price increases and increased efficiencies. net income for the first nine months of the current fiscal year was $63.6 million ($3.82 per diluted share) compared with a net loss of $44.2 million ($2.67 per diluted share) for the same period of the prior fiscal year. net income margin was 3.1% for the third quarter of fiscal 2023 compared to (10.7)% for the same period in the prior fiscal year and 4.0% for the first nine months of the current fiscal year compared with (3.3)% for the same period of the prior fiscal year. adjusted eps per diluted share was $1.46 for the third quarter of fiscal 2023 compared with $0.60 in the same quarter of the prior fiscal year and $5.40 for the first nine months of the current fiscal year compared with $1.92 for the same period of the prior fiscal year. adjusted ebitda for the third quarter of fiscal 2023 increased $20.4 million, or 66.8%, to $51.0 million, or 10.6% of net sales, compared to $30.6 million, or 6.6% of net sales, for the same quarter of the prior fiscal year. adjusted ebitda for the first nine months of fiscal 2023 increased $81.6 million, or 87.4%, to $175.1 million, or 11.0% of net sales, compared to $93.5 million, or 6.9% of net sales, for the same period of the prior fiscal year. cash provided by operating activities for the first nine months of fiscal 2023 was $110.8 million and free cash flow totaled $91.5 million. the $140.3 million increase in free cash flows versus the first nine months of fiscal 2022 was primarily due to changes in our operating cash flows, specifically, higher net income, and lower customer receivables and, lower capital spending. as of january 31, 2023, the company had $45.8 million of cash and cash equivalents on hand with no term loan debt maturities until july 2024 plus access to $277.6 million of additional availability under its revolving facility. the company paid down $67.3 million of its debt during the first nine months of the current fiscal year. "during the third quarter of fiscal 2023, our teams delivered sales growth of 4.6% and improved adjusted ebitda by 66.8% to $51.0 million," said scott culbreth, president and ceo. "as stated in previous quarters, we committed to improving our results as price realization better matched inflationary impacts and we improved our costs through operating efficiency initiatives. our team has delivered on this commitment during the first nine months of the fiscal year and i thank each of them for their efforts. demand trends did slow during the third fiscal quarter, but we are maintaining our full year outlook for net sales growth of low double digits along with adjusted ebitda margins of low double digits." about us american woodmark celebrates the creativity in all of us. with over 10,000 employees and more than a dozen brands, we’re one of the nation’s largest cabinet manufacturers. from inspiration to installation, we help people find their unique style and turn their home into a space for self-expression. by partnering with major home centers, builders, and independent dealers and distributors, we spark the imagination of homeowners and designers and bring their vision to life. across our service and distribution centers, our corporate office, and manufacturing facilities, you’ll always find the same commitment to customer satisfaction, integrity, teamwork, and excellence. visit americanwoodmark.com to learn more and start building something distinctly your own. use of non-gaap financial measures we have presented certain financial measures in this press release which have not been prepared in accordance with u.s. generally accepted accounting principles (gaap). definitions of our non-gaap financial measures and a reconciliation to the most directly comparable financial measure calculated in accordance with gaap are provided below following the financial highlights under the heading "non-gaap financial measures." safe harbor statement under the private securities litigation reform act of 1995: all forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. such factors include, but are not limited to, those described in the company's filings with the securities and exchange commission, including our annual report on form 10-k. the company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. american woodmark corporation unaudited financial highlights (in thousands, except share data) operating results three months ended nine months ended january 31, january 31, 2023 2022 2023 2022 net sales $ 480,713 $ 459,736 $ 1,585,105 $ 1,355,480 cost of sales & distribution 405,373 407,981 1,324,284 1,198,765 gross profit 75,340 51,755 260,821 156,715 sales & marketing expense 21,364 23,383 71,781 67,755 general & administrative expense 28,848 23,281 91,129 71,638 restructuring charges, net 1,310 (127 ) 1,310 183 operating income 23,818 5,218 96,601 17,139 interest expense, net 4,303 2,668 12,778 7,201 pension settlement, net 293 69,452 48 69,452 other (income) expense, net (411 ) (335 ) (1,082 ) 533 income tax expense (benefit) 4,905 (17,310 ) 21,275 (15,801 ) net income (loss) $ 14,728 $ (49,257 ) $ 63,582 $ (44,246 ) earnings per share: weighted average shares outstanding - diluted 16,695,714 16,569,881 16,661,234 16,599,369 net income (loss) per diluted share $ 0.88 $ (2.97 ) $ 3.82 $ (2.67 ) condensed consolidated balance sheet (unaudited) january 31, april 30, 2023 2022 cash & cash equivalents $ 45,817 $ 22,325 customer receivables 117,742 156,961 inventories 224,763 228,259 other current assets 23,136 21,112 total current assets 411,458 428,657 property, plant and equipment, net 203,509 213,808 operating lease assets, net 98,766 108,055 customer relationship intangibles, net 41,861 76,111 goodwill 767,612 767,612 other assets 41,167 38,253 total assets $ 1,564,373 $ 1,632,496 current portion - long-term debt $ 2,546 $ 2,264 short-term operating lease liabilities 22,515 21,985 accounts payable & accrued expenses 143,059 191,979 total current liabilities 168,120 216,228 long-term debt 440,684 506,732 deferred income taxes 26,901 38,340 long-term operating lease liabilities 83,052 95,084 other liabilities 2,476 3,229 total liabilities 721,233 859,613 stockholders' equity 843,140 772,883 total liabilities & stockholders' equity $ 1,564,373 $ 1,632,496 condensed consolidated statements of cash flows (unaudited) nine months ended january 31, 2023 2022 net cash provided (used) by operating activities $ 110,803 $ (13,051 ) net cash used by investing activities (19,260 ) (35,766 ) net cash used by financing activities (68,051 ) (41,383 ) net increase (decrease) in cash and cash equivalents 23,492 (90,200 ) cash and cash equivalents, beginning of period 22,325 91,071 cash and cash equivalents, end of period $ 45,817 $ 871 non-gaap financial measures we have reported our financial results in accordance with u.s. generally accepted accounting principles (gaap). in addition, we have discussed our financial results using the non-gaap measures described below. management believes all of these non-gaap financial measures provide an additional means of analyzing the current period's results against the corresponding prior period's results. however, these non-gaap financial measures should be viewed in addition to, and not as a substitute for, the company's reported results prepared in accordance with gaap. our non-gaap financial measures are not meant to be considered in isolation or as a substitute for comparable gaap measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with gaap. ebitda, adjusted ebitda and adjusted ebitda margin we use ebitda, adjusted ebitda, and adjusted ebitda margin in evaluating the performance of our business, and we use each in the preparation of our annual operating budgets and as indicators of business performance and profitability. we believe ebitda, adjusted ebitda, and adjusted ebitda margin allow us to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. we define adjusted ebitda as net income adjusted to exclude (1) income tax expense, (2) interest expense, net, (3) depreciation and amortization expense, (4) amortization of customer relationship intangibles, (5) expenses related to the acquisition of rsi home products, inc. ("rsi acquisition") and the subsequent restructuring charges that the company incurred related to the acquisition, (6) non-recurring restructuring charges, (7) stock-based compensation expense, (8) gain/loss on asset disposals, (9) change in fair value of foreign exchange forward contracts, and (10) pension settlement charges. we believe adjusted ebitda, when presented in conjunction with comparable gaap measures, is useful for investors because management uses adjusted ebitda in evaluating the performance of our business. we define adjusted ebitda margin as adjusted ebitda as a percentage of net sales. adjusted eps per diluted share we use adjusted eps per diluted share in evaluating the performance of our business and profitability. management believes that this measure provides useful information to investors by offering additional ways of viewing the company's results by providing an indication of performance and profitability excluding the impact of unusual and/or non-cash items. we define adjusted eps per diluted share as diluted earnings per share excluding the per share impact of (1) expenses related to the rsi acquisition and the subsequent restructuring charges that the company incurred related to the rsi acquisition, (2) non-recurring restructuring charges, (3) the amortization of customer relationship intangibles, (4) pension settlement charges, and (5) the tax benefit of rsi acquisition expenses and subsequent restructuring charges, the net gain on debt forgiveness and modification and the amortization of customer relationship intangibles and trademarks. the amortization of intangible assets is driven by the rsi acquisition and will recur in future periods. management has determined that excluding amortization of intangible assets from our definition of adjusted eps per diluted share will better help it evaluate the performance of our business and profitability and we have also received similar feedback from some of our investors. free cash flow to better understand trends in our business, we believe that it is helpful to subtract amounts for capital expenditures consisting of cash payments for property, plant and equipment and cash payments for investments in displays from cash flows from continuing operations which is how we define free cash flow. management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. it also provides a measure of our ability to repay our debt obligations. net leverage net leverage is a performance measure that we believe provides investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt. we define net leverage as net debt (total debt less cash and cash equivalents) divided by the trailing 12 months adjusted ebitda. a reconciliation of these non-gaap financial measures and the most directly comparable measures calculated and presented in accordance with gaap are set forth on the following tables: reconciliation of ebitda, adjusted ebitda, and adjusted ebitda margin three months ended nine months ended january 31, january 31, (in thousands) 2023 2022 2023 2022 net income (loss) (gaap) $ 14,728 $ (49,257 ) $ 63,582 $ (44,246 ) add back: income tax expense (benefit) 4,905 (17,310 ) 21,275 (15,801 ) interest expense, net 4,303 2,668 12,778 7,201 depreciation and amortization expense 11,814 12,507 36,578 38,453 amortization of customer relationship intangibles 11,416 11,416 34,250 34,250 ebitda (non-gaap) $ 47,166 $ (39,976 ) $ 168,463 $ 19,857 add back: acquisition and restructuring related expenses (1) 20 20 60 60 non-recurring restructuring charges, net (2) 1,310 (127 ) 1,310 183 pension settlement, net 293 69,452 48 69,452 change in fair value of foreign exchange forward contracts (3) (324 ) (177 ) (904 ) (7 ) stock-based compensation expense 1,859 1,006 5,249 3,399 loss on asset disposal 666 365 879 516 adjusted ebitda (non-gaap) $ 50,990 $ 30,563 $ 175,105 $ 93,460 net sales $ 480,713 $ 459,736 $ 1,585,105 $ 1,355,480 net income margin (gaap) 3.1 % (10.7 )% 4.0 % (3.3 )% adjusted ebitda margin (non-gaap) 10.6 % 6.6 % 11.0 % 6.9 % (1) acquisition and restructuring related expenses are comprised of expenses related to the rsi acquisition and the subsequent restructuring charges that the company incurred related to the acquisition. (2) non-recurring restructuring charges are comprised of expenses incurred related to the permanent layoffs that occurred during january 2023 and the closure of the manufacturing plant in humboldt, tennessee. (3) in the normal course of business the company is subject to risk from adverse fluctuations in foreign exchange rates. the company manages these risks through the use of foreign exchange forward contracts. the changes in the fair value of the forward contracts are recorded in other (income) expense, net in the operating results. reconciliation of net income to adjusted net income three months ended nine months ended january 31, january 31, (in thousands, except share data) 2023 2022 2023 2022 net income (loss) (gaap) $ 14,728 $ (49,257 ) $ 63,582 $ (44,246 ) add back: acquisition and restructuring related expenses 20 20 60 60 non-recurring restructuring charges, net 1,310 (127 ) 1,310 183 pension settlement, net 293 69,452 48 69,452 amortization of customer relationship intangibles and trademarks 11,416 11,416 34,250 34,250 tax benefit of add backs (3,341 ) (21,586 ) (9,202 ) (27,753 ) adjusted net income (non-gaap) $ 24,426 $ 9,918 $ 90,048 $ 31,946 weighted average diluted shares (gaap) 16,695,714 16,569,881 16,661,234 16,599,369 add back: potentially anti-dilutive shares (1) — 40,973 — 47,878 weighted average diluted shares (non-gaap) 16,695,714 16,610,854 16,661,234 16,647,247 eps per diluted share (gaap) $ 0.88 $ (2.97 ) $ 3.82 $ (2.67 ) adjusted eps per diluted share (non-gaap) $ 1.46 $ 0.60 $ 5.40 $ 1.92 (1) potentially dilutive securities for the three- and nine-month periods ended january 31, 2022, respectively, have not been considered in the gaap calculation of net loss per share as the effect would be anti-dilutive. free cash flow nine months ended january 31, 2023 2022 net cash provided (used) by operating activities $ 110,803 $ (13,051 ) less: capital expenditures (1) 19,283 35,771 free cash flow $ 91,520 $ (48,822 ) (1) capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays. net leverage twelve months ended january 31, (in thousands) 2023 net income (gaap) $ 78,106 add back: income tax expense 23,820 interest expense, net 15,768 depreciation and amortization expense 49,064 amortization of customer relationship intangibles 45,666 ebitda (non-gaap) $ 212,424 add back: acquisition and restructuring related expenses (1) 80 non-recurring restructuring charges, net (2) 1,310 pension settlement (931 ) change in fair value of foreign exchange forward contracts (3) (897 ) stock-based compensation expense 6,559 loss on asset disposal 1,060 adjusted ebitda (non-gaap) $ 219,605 as of january 31, 2023 current maturities of long-term debt $ 2,546 long-term debt, less current maturities 440,684 total debt 443,230 less: cash and cash equivalents (45,817 ) net debt $ 397,413 net leverage (4) 1.81 (1) acquisition and restructuring related expenses are comprised of expenses related to the rsi acquisition and the subsequent restructuring charges that the company incurred related to the acquisition. (2) non-recurring restructuring charges are comprised of expenses incurred related to the permanent layoffs that occurred during january 2023. (3) in the normal course of business the company is subject to risk from adverse fluctuations in foreign exchange rates. the company manages these risks through the use of foreign exchange forward contracts. the changes in the fair value of the forward contracts are recorded in other (income) expense, net in the operating results. (4) net debt divided by adjusted ebitda for the twelve months ended january 31, 2023.
